Internationalization (i18N) is the process of bringing your application to
the world... having it work properly and appropriately on any locale.

Localization (L10N) is the process of bringing the world to your
application.... localizing is translating the application (not just the
language but also translating culture/convention and other issues).

Another way of looking at it (from a colleage of mine who was reviewing my
book):

i18N is like being a proper guest at someone's house.
L10N is like making yourself at home there.

(BTW, usually the convention is to capitalize and not capitalize the words
as above, since many fonts are unclear on upper case "I" and lowercase "L".